Meet the Trader 05: Gavin Andresen, Clearcoin

Meet the Trader is a series of interviews conducted to explore the people behind the Bitcoin project.

Episode 05: Gavin Andresen of ClearCoin, Bitcoin Faucet and Bitcoin.org. Gavin studied Computer Science at Princeton and started his professional career in Silicon Valley. ClearCoin is an escrow service that helps to mitigate the risks involved with Bitcoin transactions.

{ Introduction }

No matter how you look at it, Bitcoin is an interesting topic. The currency has unique properties that threaten multiple paradigms, and its momentum as a store of value is undeniable–as the unit-value has risen astronomically over the last year.

That’s not to say there aren’t significant challenges. While the young protocol seeks legitimate recognition, it is also firmly rooted in an open source community of developers that may not appreciate that level of formality. As a project, Bitcoin is just now hitting adolescence and is in need of a parent.

Gavin entered the fray last June. He now heads Bitcoin.org as a man of the people–one whose reputation was formed by checking in at Github and validated when he earned the trust of the legendary Satoshi Nakamoto. Beyond being an advocate for Bitcoin, he has founded a company that has a revenue model aligned with the fate of Bitcoin.

His company, Clearwing, hosts two essential services: The first is a non-profit endeavor called the Bitcoin faucet, which donates a few bitcents to those new to Bitcoin. (Donating to the faucet is as easy as sending coins to the address at the bottom of its page.)

The second service, Clearcoin, addresses a pressing need within the Bitcoin community: the need for escrow. That is to say, how can commerce flourish when a seller isn’t sure if the buyer actually has the money for the transaction? (…until after his goods are shipped and recieved.) As you could imagine, without escrow, doing business in BTC is awkward to say the least.

The key behind any escrow service is trust. Gavin may be a man worthy of it.

I know that trust is hard to gain and easy to lose, and an escrow service is really all about trust. So I suppose I’d say ClearCoin is maturing slowly, in small, careful steps.

Gavin Andresen:

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{ Interview }

Spencer: What’s the story behind Clearwing Software? Is it your livelihood? Has the ClearCoin offering made an impact on the company’s bottom line?

Gavin: I created Clearwing Software shortly before launching ClearCoin for legal and accounting reasons. It is a startup, and hasn’t generated significant revenue yet– the entire bitcoin economy needs to grow before there will be enough transactions for ClearCoin to be profitable. It is my full-time job, but I’m tapping savings from previous jobs and entrepreneurial ventures to pay my day-to-day expenses.

Spencer: Is entrepreneurship in your blood? Could you share a bit about your previous experiences?

Gavin: Maybe all of the moving around when I was a child made me more open to trying new things and taking risks. Working in Silicon Valley for eight years after college immersed me in an entrepreneurial culture, and gave me enough financial security so I could pay off my student loans and start a little two-person software company.

Like most startups, it flopped– we created software for a market that we thought might take off (360-degree-wraparound panoramic photography)… but didn’t.

My next venture was more successful– I joined a Western Massachusetts startup doing an early voice-over-the-Internet application (Roger Wilco), which was sold to a Silicon Valley company before the .com implosion. After that was All inPlay, a socially-conscious startup that never found a good way to market online games to blind people and their sighted friends and family.

Spencer: How did you get involved with Bitcoin and eventually become the head at Bitcoin.org? What kind of leader do you aspire to be?

Gavin: I first heard about Bitcoin in May of 2010. I was looking for a new
project to tackle, and Bitcoin matched several things I was interested
in– economics, peer-to-peer technologies, and cryptography. I started by reading Satoshi’s paper, all of the messages that had been posted on the bitcoin forums, and even the initial discussions sparked by Satoshi’s announcement of bitcoin on the cryptography mailing list. Back then it was possible to read everything that had been written about bitcoin in a day or two.

I decided the Bitcoin Faucet would be a good, easy first project, so I
implemented it and then spent $50 to buy 10,000 bitcoins and began giving them away.

I submitted some patches to Satoshi for various features that I thought were missing from core bitcoin and started proposing new features on the forums… and then a few months ago Satoshi asked if it would be OK if my email address was listed on the bitcoin.org “Contact Us” page.

I didn’t realize he was planning on removing his email address! So I became the de-facto technical contact for bitcoin. I’ve had lots of previous experience acting as the “chief technical officer” for startups, although never for an open source project before– I’m learning as I go.

As for what kind of leader do I aspire to be: one of many, I hope! When I talk about the Bitcoin project I try to suppress my personal political and business agendas so I give an accurate impression of Bitcoin. And I try to keep an open mind when presented with new ideas, even if the idea starts with “Bitcoin can’t possibly work because…” I would like to see Bitcoin leaders from different
countries, cultures, and political philosophies talking about why it is a good idea.

Spencer: I could imagine being the head of an open source project is kind of like herding cats. How does the heirarchy play out within Bitcoin’s development community?

Gavin: Compared to a business, there is almost no hierarchy; anybody can
contribute code, and my policy on who has write access to the git repository has been “whoever contributes lots of patches and is willing to help.” With software development it is easy to see who is creating useful stuff– those are the people who naturally become the leaders of the development community. The “cat herding” aspect comes up when it is impossible to get everybody to agree on which stuff is useful and which stuff isn’t, and that is where the leader or leaders
sometimes have to step in and make a decision so the project keeps moving forward.

Spencer: What have been some of the interesting observations made while operating Clearcoin? How has the product matured since its debut in December?

Gavin: The most difficult thing for me has been balancing work on core Bitcoin, work on ClearCoin, and work on the business side of ClearWing Software. I need Bitcoin to be used more for ClearCoin to really be a viable business… but maybe an easier-to-use ClearCoin would help make that happen. And on the business side, getting investors and seed capital would let me grow the company faster… but maybe I should make the product better while giving the Bitcoin economy time to grow.

I’ve been extremely cautious with ClearCoin, because I know that trust is hard to gain and easy to lose, and an escrow service is really all about trust. So I suppose I’d say ClearCoin is maturing slowly, in small, careful steps. I’m in the process of creating an API for it so websites and tools can be built on top of it. In hindsight, I should have built the API first, because it has been very useful for creating rigorous automated tests to make sure I don’t break anything as I add
new features.

Spencer: Escrow seems especially needed with Bitcoin because of the irreversible nature of the transactions. So ClearCoin is making Bitcoin a more tenable currency for traders, but there is still a risk that funds won’t be released to the seller. Could you explain ClearCoin’s “charity escrow” implementation and how it attempts to deal with this risk?

Gavin: The person sending the bitcoins can create “charity escrows” which will donate escrowed coins to charity instead of refunding them if the transaction goes bad. That gives both people the same incentives and risks– there is little incentive for the sender to try to cheat because they will lose their bitcoins whether or not they release the coins. And there is little incentive for the receiver to cheat, because if they do they won’t receive the coins, either.

I really like the idea of some good (donating to charity) coming out of a bad situation (a transaction that didn’t go as planned).

Spencer: One of the principle concerns that newcomers have when they learn about Bitcoin is that their wallet files are only as secure as their computers.
Are there any steps being taken to improve the Bitcoin implementation as it relates to this issue?

Gavin: Making the wallet secure from ‘casual theft’ by requiring a password to send coins is high on my priority list for Bitcoin, and Jeff Garzik has an initial implementation to get the discussion going for how, exactly, that should work.

However, there is really nothing anybody can do to prevent a virus or trojan from stealing your coins if a compromised computer is the only device you have for sending bitcoins. Malware could lie in wait on your system and discover your wallet password the first time you go to send coins. The only way to solve that problem is to get some other device involved– for example, I could imagine requiring that your computer rendezvous with an app running on your cell phone to send bitcoins, requiring you to confirm the transaction on both devices
before they’re sent. Assuming the malware didn’t manage to infect BOTH your computer AND your cell phone, that could be secure.

“Rome wasn’t built in a day,” though, and the first step is to at least make it much harder for somebody to sit down at your computer when you’ve stepped away and emptying your wallet by sending themselves your coins.

Spencer: As one who has started a Bitcoin service of your own, how did you frame the pertinent legal issues as they related to your business?

Gavin: I’m reluctant to talk about specific legal issues and regulations,
because I am not a lawyer and I know there are laws and regulations
about giving legal advice.

I think it is safe for me to say that I’m lucky be in Massachusetts
instead of California, because the regulations for escrow companies in
California “requires a manager who possesses a minimum of five years
of responsible escrow experience to be stationed at the Licensed
location.”

Spencer: One could say that you have a finger on the pulse of the Bitcoin economy, as you have a sense for the volume of trades. What do you regard as the primary impediments to a bustling, high volume bitcoin economy?

Gavin: I think there are three major impediments right now:

First, it is still too hard to purchase bitcoins. CoinPal is a great service for purchasing small amounts of bitcoins, but we really need a convenient, legal way for new people to purchase several hundred to a few thousand Bitcoins.

Second, it is still to hard for website owners to start accepting bitcoins. I think that problem will get better soon as people gain experience doing it and, hopefully, hire themselves out so website owners can concentrate on selling their products or services and not worry about whether they should run bitcoind on their web server or which shopping cart interface software and E-wallet service they should use.

Third, Bitcoin has to find initial market niches where it is significantly better than existing solutions. I don’t think being less expensive than (for example) credit cards will be enough on its own to convince consumers to start using bitcoin instead of dollars, for example. Maybe one initial market niche for bitcoins will be small business owners who are very aware of how much credit card transactions cost, are tired of paying chargeback fees or bounced check fees to their banks, and so decide to start using bitcoins to pay other small business owners for products and services. I don’t think there is any way to predict in advance what the “killer applications” for bitcoin will be, so I expect to see a few uses take off while a lot of others don’t.

Spencer: You hit upon an exciting point: there is much room for Bitcoin growth internationally. To be a global currency, there will need to be “Gavin’s” for the different subsets. Consider you are a member of the press in Brazil and want to talk to a “major participant” of the bitcoin project in Brazil. Where does one even start? Then consider the same question for China, India, Pakistan or any of the 150+ nations that should be getting on board. (Question from Bitcoin News)

Gavin: Martti and I recently set up a “bitcoin-press@lists.sourceforge.net”
mailing list for press inquiries, and as we get inquiries we’ll try to figure out who would be good people all over the world to talk to reporters about Bitcoin. However, the first person to setup an exchange site for Bitcoins to/from Brazilian Reals or who creates a popular Brazilian Bitcoin information web site will probably be the first person reporters in that country talk with, and the first person we’ll direct them to.

Spencer: As far as Clearcoin’s net profits are concerned, it seems like a high margin business with very low fees. How much will it need to scale in order to be a big money maker?

Gavin: The entire bitcoin economy needs to be much bigger for ClearCoin to
start making money and paying for all the time I’ve already invested–I’d estimate 50 to 100 times bigger, although I have to admit I haven’t bothered writing a business plan with projected growth rates and estimated revenue. From my experience, and from the research I’ve seen, successful entrepreneurs don’t make grand five year plans; they take advantage of opportunities as they arise. I won’t be surprised if a year from now ClearCoin looks and works completely differently from the way it looks and works today.

Spencer: What’s the runway look like for ClearWing? (How long have you given yourself for the service to take off?) Are you in it for the long haul?

Gavin: I will give it two years, and if it isn’t taking off I’ll either gracefully shut down the service or merge with a larger Bitcoin service that could use an escrow solution. I plan on sticking with Bitcoin-related projects for as long as Bitcoin is taking off, though, so expect to see other projects from ClearWing Software even if ClearCoin isn’t the success I hope it will be.

Spencer: There seems to be quite a bit of academic interest surrounding Bitcoin at George Mason University. Are you aware of any other recent developments in the academic community?

Gavin: I haven’t heard of anything– I have a Google Scholar alert set up so I’m told when academic papers that mention bitcoin come out, and there have been only a handful so far. My wife is an academic, so I know how long the academic process can take– create a grant proposal, submit it, wait six months or more for it to be approved (or not), then find graduate students or hire post-docs to help with the research which can take a year or two or four…

Spencer: You talked a bit during your EconTalk Podcast about Satoshi and his “benevolence.” From the community: (Blitzboom) Would you like to meet Satoshi, and what do you think of him as a person?

Gavin: Sure, I’d like to shake Satoshi’s hand and congratulate him on creating what I think might transform the world’s monetary system. I can’t really speak to what kind of individual he is– all of my conversations with him have been strictly about Bitcoin. He’s obviously extremely smart and very driven; it is astounding how many details he got right when designing and implementing Bitcoin.

I hope there are projects in the academic pipeline to study Bitcoin that I just don’t know about.

Spencer: Thanks Gavin for doing the interview!

Gavin: You’re welcome!

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